Regulation Shmegulation

in LeoFinance2 months ago

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Everyone is making quite the fuss over this regulation rumor. The Trump administration may want to KYC all wallets that Coinbase and Bittrex send funds to. What does Coinbase's Brian Armstrong have to say?

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So many good points made.

I don't even like this guy, but he is really laying it all out on the table.

  • You can't KYC a smart-contract.
  • You can't KYC the unbanked.
  • Businesses don't require KYC, they are public.
  • DeFi tech does not merge with KYC.
  • KYC on non-fungible tokens is ridiculous.
    • Includes gaming and social media.
  • Privacy is important, centralized hacks are a threat.
  • Added friction crushes innovation.
    • This cuts off America from abundance tech.
  • Parallels to early Internet are obvious.

If we had allowed the phone companies and the entertainment industry to regulate the Internet, it simply wouldn't exist. Or rather, America would have banned it and would have subsequently been left in the Dark Ages like North Korea.

This time around, central banking and governance itself is being challenged. The stakes are much much higher, and so the resistance will also be predictably exponentially higher.

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What's the point?

The one thing that Bry Bry fails to mention is the benefit of these KYC regulation rumors: There isn't one.

Let me explain...

Okay, so all American exchanges are now doing KYC on the wallets they transfer crypto to. What's the point? Coinbase already has KYC information on my account. If my account sends Bitcoin to a wallet and that wallet is also KYCed to my identity... so what? All I have to do is send the Bitcoin from that wallet to a non-KYC wallet. This "regulation" would just add one extra step... one extra transaction fee to avoid the silly and pointless KYC. There's absolutely no point to it; it is nonsense.

Which makes me think perhaps the only point of floating this rumor was to make the dip happen in order to manipulate the market and potentially even engage in insider trading during a time when everyone was saying the price was going to crash anyway. Well played if so.

And while something like this could be seen as an attack against Bitcoin/Ethereum because on-chain fees are so high, it's pretty damn awesome for networks that scale higher like Litecoin and whatever else. No one complains about Litecoin fees (yet). Moving funds from the KYC offramp to another wallet would cost less than a penny at these rates. Again, this regulation serves absolutely no purpose and is completely nonsensical. What do they possibly hope to gain from such implementation?

"Not a security"

There's a reason why Bitcoin was deemed "not a security". It's impossible to regulate, so why even try. Adding this extra layer of KYC doesn't actually do anything but choke the corporations connected to Bitcoin.

Paypal

Paypal's new crypto business model is very very regulator friendly. It turns peer-to-peer currency into exactly the opposite, and that's what regulators want: to track and control everything. We'll, too bad, not gonna happen. The financial sector has been choked for so long it's evolving into something that can't be choked. This beast has no head.

There are so many posts I need to write.

Where does the time go?

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Regulators are trying to tighten the hold on this market and bottleneck all the markets through institutions they can control. This is the standard play, and it's going to fail spectacularly. It already is and has countless times. This regulation rumor is just further evidence of how incompetent they've become and how rusted and useless the tool-chest will be.

Just like the shear existence of Bitcoin allows dozens of other digital currencies to exist that should have been slapped down by regulations already, so will the tech evolve to make these regulations completely pointless.

Other on/off ramps to crypto/fiat are going to emerge. The crypto gig economy is coming where 'employees' will get paid directly in crypto. More and more crypto users will stop exiting to fiat altogether as products/services are paid for directly in the native currency. All of these developments add up to only one thing: regulations on exchanges only hurts the exchanges and the countries imposing them.

The regulators and the politicians and the corporations and gold bugs and the banks can whine as much as they like, but it simply does not matter on a long term scale. DLT is too valuable of an abundance technology to be stopped. Barriers will be erected only to be rendered completely inept.

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So let the manipulators manipulate.

All we have to do is hold and we win.

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Good one
I wish it had included Bryan Armstrong's obvious personal motivation:
https://www.coindesk.com/coinbase-analytics-blockchain-analysis-crypto-government

He's happy to voluntarily regulate, track everyone's movements, and sell that data to the US government. Massive KYC action would take a huge bite out of his analytics business

Ha, that's rich!

However, like I said, I don't think this regulation would really have any value to the regulators or the IRS, and would only serve to needlessly burden American Exchanges with useless overhead and less people using Coinbase. Less people using Coinbase means the analytics system they've developed is even less accurate. So said KYC of secondary wallets only serves to do the opposite of what is being claimed.

Which makes me think perhaps the only point of floating this rumor was to make the dip happen in order to manipulate the market and potentially even engage in insider trading during a time when everyone was saying the price was going to crash anyway. Well played if so.

Gotcha...

It turns peer-to-peer currency into exactly the opposite, and that's what regulators want: to track and control everything.

Indeed they're trying and that's why they're working so hard on these damn CBDCs.

Other on/off ramps to crypto/fiat are going to emerge. The crypto gig economy is coming where 'employees' will get paid directly in crypto. More and more crypto users will stop exiting to fiat altogether as products/services are paid for directly in the native currency.

Something I'm very eager about. I am also thinking to ditch my bank account and only use Revolut and probably some visa crypto to fiat card.

Bottom line I don't like this bald guy from Coinbase and you gave a little hopium for my LTC holdings. I will stick to my plan with crypto and expecting the peak for BTC to occur sometime in October or November 2021.

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Indeed they're trying and that's why they're working so hard on these damn CBDCs.

Even this makes very little sense. Indeed, it does seem that they are working on this very hard... but why is this task so difficult to accomplish? All they have to do is modify code that already exists to give themselves full control.

No one questions the fact that Bitcoin could have been created by a single person. Why then, if you have the resources to hire hundreds of devs, would creating a CBDC be difficult in the slightest bit? I must be missing something here because it is very strange.

They probably have to sort out regulations first. I doubt BTC is a one man job

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That's exactly why it's all going to fail... because the red tape is so ridiculous these days that the politics are 100 times more work than the actual development. Meanwhile... crypto keeps developing at x100 the speed of regulators.

Wait are you trying to tell me thousands of government employees and contractors won't be able to accomplish what a few guys in their basements crank out on a regular basis?

I am shocked. Shocked, I tell you.

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A bit off topic but that long chain of Tweets clearly demonstrates the need/demand for platform LIKE THIS. By the looks of all those 'likes', consumers clearly don't mind reading complex thought processes that require more than two sentences; long form content, but sitting around waiting for the next thought is a severe pain in the ass.

And on topic, yes, of course the media plays a role in directing minds to make decisions. Often I'll watch the crypto crowd hype what they want to happen next but the message is always between the lines somewhere. It's the same with all media and any topic really. In politics, science, entertainment. It's everywhere. Movies and games were huge hits according to the media, weeks before they even get released...

A bit off topic but that long chain of Tweets clearly demonstrates the need/demand for platform LIKE THIS.

Each day I see more evidence of the need for a platform like Hive. Over time, the established system is going to put enough people in a bad position that they will look for alternatives.

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I was thinking the other day how Hive could easily have both formats tied together in one place. For instance, plug that D.buzz into PeakD, then we could still sit here, like this, but I could also be seeing a stream of "tweets" from the same list of those I follow, in real time. Just a little box I could bring up or hide at any point, and even an annoying notification bell sound effect. I'm not sure if you've played Cities Skylines but their "chirper" is what I have in mind.

Coming to Leo Infra in a couple weeks per Khal.

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Damn you guys are good.

I agree that requiring KYC only on a single address is completely useless. But what the US government could do is force every exchange under its jurisdiction to only accept transfers form whitelisted addresses. For an address to be whitelisted it would have to be KYC'd and its entire history would have to be free from any interactions with un-KYC'd addresses.

Then the only way to convert balances in non-whitelisted addresses into fiat in the US would be to use them for buying mining power from a foreign pool than accepts coins not whitelisted by US regulators. Of course, the US government could blacklist any addresses used by that mining pool to block that loophole but it is unlikely that they could blacklist all loopholes at once.

I discussed regulating DeFi in my latest post. There's more to that if you're interested.

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For an address to be whitelisted it would have to be KYC'd and its entire history would have to be free from any interactions with un-KYC'd addresses.

So you whitelist a new wallet... KYC it... and then transfer money to it and break the whitelist by transferring it somewhere else. The kind of regulations you are implying are again impractical and ineffective. Not saying that would stop of government agency from being impractical and ineffective, but still.

So you whitelist a new wallet... KYC it... and then transfer money to it and break the whitelist by transferring it somewhere else.

The whitelisting could only be done by KYCing it and having its history checked against a list of known whitelisted accounts. As long as there were an interaction with a non-whitelisted address, that wallet could not be whitelisted. You could only de-whitelist a address by interacting with a non-whitelisted address. After that point, the address would become non-whitelisted.

It would be like creating an address garden of whitelisted addresses. This is precisely what PayPal is doing by allowing their users to have exposure to the price action of BTC without allowing them to send funds to any non-PayPal holder of Bitcoin while sidestepping the entire on-chain transfer business as unnecessary.

The kind of regulations you are implying are again impractical and ineffective. Not saying that would stop of government agency from being impractical and ineffective, but still.

Yes, they would totally suck. But you could make it possible to divide the existing addresses into KYC'd and non-KYC'd ones and make interacting with non-KYC'd ones have consequences (like having no regulated exchange allow cashing out a balance in any non-KYC'd address that has had interactions with addresses that are non-KYC'd or that are KYC'd but have had interactions with non-KYC'd addresses .. and recursively until a address garden as been established.

The whitelist would have to be constantly updated. A status history of addresses would have to be maintained somewhere off-chain. There'd have to be a huge centralized database out somewhere.

But what would reduce the practicality of this is that anyone could send a tiny sum from a tainted address to any known address in the address garden thus effectively de-whitelisting that address and every address that will interact with it after that. A "terrorist" could inflict a lot of damage by bombarding addresses with such transactions :D Only by sending the funds to the police could whitelist you again (which would be expensive thanks to high transaction fees). That would teach entities and people never to reuse addresses. :D

Sorry, I've had a few beers. :D

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The sad thing about that last meme there, is that there is no worn path around the barrier.

Regulation wins again!

No one rules where none obey.

it's pretty damn awesome for networks that scale higher like Litecoin and whatever else.

They arent complaining about the fees on Hive either.

I just did a video on the impact of Libra. My theory is they instantly, upon the release in January, become the second most powerful financial institutions in the world behind the Fed.

Governments are basically powerless against that.

My hope is that, as much as we hate FB, it serves as a feeder system.

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Man and Libra too... too many things to talk about these days.

Also I forgot to mention that you could just KYC your input wallet to a non-KYC exchange... then that value can exit the exchange in the form of any cryptocurrency and it all comes out of the same obscured hot wallet.

Well, the worst case scenario is it makes CEX even less desirable.

With more people having some form of crypto, I imagine that crypto-to-crypto transactions are on the increase, at least in relation to fiat to crypto. Sure there is a need for the on and off ramp, but we are seeing a lot more people "traveling" around the crypto world.

That is where we see a lot of development, with swaps and DEX and the like....all sans KYC.

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Yes I did suppose I forgot to mention that any bearish action against centralized exchanges is a boon for decentralized ones. The true mind games happen when AI starts controlling crypto. Try and KYC that why don't ya.

LOL AI is likely going to take over governments too.

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All we have to do is hold and we win.

Or sell at the start of the manipulation and buy when we think is a lowpoint. Even better for us.


There are also decentralized exchanges and if they are banned in the USA, just use a VPN. Need some fiat? Use localbitcoins. There are so many ways to avoid every measures that is put in. :)

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Yeah the VPN workarounds are especially hilarious.

They work, with a Switzerland IP everyone is safe, also more trustworthy on any website.

Depending on the region from Switzerland where the IP is issued, you will have different languages for the add, but in the rest, you will get access to more sites than normal. For example, localbitcoins can't be reached with a German IP. :)

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You're right, at the end let the manipulators manipulation, it wouldn't hold that much. Most of these regulations can be laughable but then there really wouldn't be that big enough reason to make bitcoin and Crypto a culpable scape goat.

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What is laughable is they only apply to the US based entities. Without the SWIFT network, their influence over other countries financial entities diminishes.

They can post all the laws they want, too many countries will simply tell them to screw off.

Technology is changing things greatly.

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Exactly, not all the countries will actually conform to these laws there are just too many narratives and they can't control everything. It's like asking a river not to flow.

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They will no doubt try and make examples out of some people. The solution is to go anonymous or look for safety in numbers. If every DeFi developer goes satoshi nakamoto and releases their code from behind the veil of anonymity, then who are they going to attack? In case of anything decentralized, it doesn't matter who wrote the code as long as it's out there for anyone to verify.

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Governments, expecting to control everything how they want and control people and their lives.
Also, they are scared of how much impact it will have over traditional money and its uses, that it will poorly affect everything they control linked to real money and not cryptocurrency.

They can try but they are still getting into it at the same time as they know they can't stop it.

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Buy on rumours and sell on news, this is a strategy well known in stocks market but might work also in the cryptocurrencies space. While it is too high for me to buy Bitcoin in this period, I bought some Ethereum at around $500 and wait to see if it will bounce back how most of us are expecting. If not probably it will translate into a medium to long investment, but nevertheless no sell on lose for this kind of investment.

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This is a great post, and this is a golden nugget:

So many good points made.
I don't even like this guy, but he is really laying it all out on the table.
You can't KYC a smart-contract.
You can't KYC the unbanked.
Businesses don't require KYC, they are public.
DeFi tech does not merge with KYC.
KYC on non-fungible tokens is ridiculous.
Includes gaming and social media.
Privacy is important, centralized hacks are a threat.
Added friction crushes innovation.
This cuts off America from abundance tech.
Parallels to early Internet are obvious.

Great Points, and this one wins the golden nugget award:

There's a reason why Bitcoin was deemed "not a security". It's impossible to regulate, so why even try. Adding this extra layer of KYC doesn't actually do anything but choke the corporations connected to Bitcoin.

Great Post!

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